Heads roll at Sears
After a miserable fourth quarter, the retailer brings in a new chief executive and signals some management departures.
How bad is it? Fourth-quarter profit dropped by 13%. Same-store sales fell 4.5% at Sears locations. Gross margins were down while merchandise inventories rose. Even the company's standout business -- appliances -- saw profit erosion. The clothing and consumer electronics businesses were also on the decline. The debt picture is sketchy, with Sears issuing $1.25 billion in notes last year at 6.625% -- a higher rate than the company would have liked.
The share price dropped more than 5% on the news to $82.41 in late-afternoon trading.
Lampert makes one thing very clear: Heads are going to roll. "This requires us to part ways with some who have given great effort, but who have fallen short of the performance required for us to be competitive," he writes. I hope the appliance managers are looking at Monster.com right now.
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And with some leaders heading out, Lampert is bringing in an unusual choice as chief executive: Lou D'Ambrosio, a man with zero retail experience. D'Ambrosio was previously CEO of Avaya, a telecom equipment company, and before that spent 16 years at IBM (IBM). D'Ambrosio has spent the last six months as a consultant to the Sears board.
Why is a tech guy running a retail company? Perhaps this is a clue: D'Ambrosio helped take Avaya private in 2007 in an $8.2 billion deal. Sears' own press release describes the deal as "delivering attractive returns" to Avaya shareholders.
This seems to fall in line with a trend I've written about before at Sears. The company has been buying back shares at a brisk pace, taking the number of shares outstanding to 109 million from 160 million in 2007. Three-fourths of the company is owned by three entities: Lampert, Lampert's hedge fund and another hedge fund. Sears ended its quarter Jan. 29 with $1.4 billion in cash and $9.1 billion in inventories, which total more than its $10.2 billion market cap.
All of this has some thinking that Lampert wants to take Sears private, and has tapped D'Ambrosio to make it happen. So I think shareholders can hope for one of two scenarios occurring here: Sears goes private in a deal that makes shareholders -- particularly Lampert -- happy, or D'Ambrosio uses his tech savvy to help Sears better compete with the likes of Amazon (AMZN), Home Depot (HD) and Target (TGT).
Both options are iffy, frankly. But consider this moment Sears' big Hail Mary pass. It's now or never.
Sears "is a big company long heading downhill with nobody applying the brakes," one retail analyst told MarketWatch. "And now they’ve changed the driver, but the real back-seat driver -- who controls the brakes, gas pedal, steering wheel and maintenance -- is staying the same."
I am 60 years old, I have had my Sears account since 1969. I own my own business and pay my bills on time. My credit card with Sears after hundreds of purchases at Sears over the years it was at a limit of $10,000.00 (not bad for being with them for 31 years) and recently my credit card with them was reduced to $1,500.00. Sears is wondering what has happened to their business, especially appliances, electronics and large purchases??? If you devastate your credit card account customers, what do you expect? Once I saw that I vowed not to purchase anything at Sears again. Again, I have bought dozens and dozens of appliancea for me, my daughter, my father and mother and my father-in-law. It was so convenient and the Kenmore products were very good. Suck it up Sears Management like you wanted me to do.
I'll go to Home Depot who didn't penalize me by instantly lowering my credit card account.
Regards from an Irate EX-Sears customer
The Biggest Problem is you treated your employees like garbage, I know I worked there for 12 years.. Your Comment heads are going to roll are proof right from the horses mouth...or should I say Pony... you force them to sell credit or get fired.. at 29% interest ... you make your employees operate in fear, especially those who have over ten years .. if they don;t sell enough credit cards, and extended warranties they go on PPI ..
Why dont you put the blame for the loss where it belongs .. its you dude... be responsible for your position.. the bottom line is in your lap... you have screwed so many employees they nor there familys will ever shop at Sears, Kmart. Autozone ever again.. my family alone cost you over 50,000 in sales a year... Take a look at the middle east .. people dont respond well to Dictators... Why dont you buy an Island , drink ,have fun and get old . and let someone with some people skills run the company... I know its to late for that , Sears is just name in the History Books now...
Mr. Lambert, Lou, I would thoroughly enjoy a conversation with you from the sales floor. I would show you a cross-reference of your lost 13% to the loss of my commission due to 'theoretical' inventory' being sold based on a promise date and failed deliveries. Then multiply that issue by every other associate under the same circumstance... then by similar issues with installation failures... defective product... nonchalant call centers... you get the gist.
I would discuss an archaic system that promotes stagnation on the floor when an associate is on hold for 45 minutes to an hour with service, simply trying to get straight answers to any given issue. I would discuss pay in and of itself, (to be expected), when the company recovers product margin on a 'super' sale, by dropping wages to compensate... from the very people struggling every other day of the year to support a company that doesn't hesitate to abandon them in the name of, "it must be the sales force."
You have highly skilled, trained, (unfortunately from other companies), yet loyal employees out here in the trenches. Sometimes giving them unsustainable quotas and calling them failures spurs them forward. Most times it simply means that line 34 of spreadsheet 960 needs to be replaced, Silence means success, after all.
A faltering number does not mean someone isn't following the process... sometimes the process is simply flawed. I am carrying my numbers, my clients enjoy their visits and even bring me spoils when it comes time to break in the new oven.
And from day one, if the system is flawed... I fix the system to the best of my ability... That is until someone else notices and says, "You're only here to sell, I need you to sell, I pay you to sell."... no, actually, given a good discount, you don't.
I will try to help Sears succeed Mr. Lambert, Lou... thanks for listening.
It's hard to sell product when you don't have product to sell! Sears didn't stock up for Christmas season of 2009, so Sears associates watched customers go elsewhere because they didn't have and couldn't order the products customers wanted. You can't blame the in-store associates for that.
Combine lack of inventory, declining quality of Sears house branded products and service, and management forcing associates to use high pressure sales tactics to try to sell over-priced protection agreements, add in the low pay rates for associates that are causing the good sales people to leave Sears in droves, and you have the reason for the decline and eventual fall of Sears. Sears has been in decline due to poor upper management for years, but when the hedgies bought it, that was the final nail in the Sears coffin.
When shopping at Kmart, please don't blame the employees if they seem less than helpful, believe me, they are trying. They way things are right now, there is only a few employees working at once at any given time. Each employee is left to do the work of 3 or 4 people and are being run ragged. It's sad because all these people are doing is trying to make a living by coming to work everyday. They are getting worked to death and then the customer's blame them for the lack of help around the store. Don't blame the one's who are actually there working. It's not their fault the company is too cheap to give out hours so that there are enough people to help you.
Without a doubt, Sears has the worse customer service of any retailer I have ever dealt with. Mr. Lampert's problem start there...change the culture of how his company treats customers, in the stores, on the phone, with complaints, servicing his products...create a culture that looks like the employees care and have a stake in what they are doing, and that will be a great start.
After that, I would suggest that they bring their stores into at least the 1990's (they look like they are stuck in the 1940's) and start selling things that reflect quality and economy...stop selling junk.
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Since our last update, the International Monetary Fund has lowered its growth forecast for the U.S. to 1.7% from 2.0% and said the Fed may need to delay its first rate hike due to the contraction that took place in the first quarter. Furthermore, the IMF described the U.S. labor market as 'reasonably healthy.'
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